RBA cuts rates

For the second consecutive year, the Reserve Bank of Australia has managed to upstage the race that stops a nation – Melbourne Cup.

At its November Board meeting this afternoon, the Reserve bank decided to cut 25 basis points from the official cash rate, taking the new rate to just 4.5 per cent.

The announcement failed to shock industry pundits, with many economists predicting a November rate cut.

Last week’s benign inflationary growth provided the RBA with the right impetus to cut rates, according to RP Data’s national research director Tim Lawless.

“The rate cut should not come as a surprise from a housing market perspective, considering the soft market conditions that have been evident since June last year have created no inflationary pressures,” he said.

“In fact, capital city home values are down 3.6 per cent from their December 2010 peak and rental rates have increased by just 4.5 per cent over the 12 months to September.

“The improved debt servicing position will be a welcome improvement to anyone with a mortgage, however the primary benefit from the rate cut is likely to be seen in an improvement in consumer sentiment which should lead to an uplift in housing transaction volumes which are currently tracking about 13 per cent below the five year average nationally.”